Lift co-founder Gidon Novick on return to aviation industry, airline's future

When Gidon Novick departed from the airline he had founded, he had no intention of ever coming back to aviation.

Who would be so mad? This is a  business  riven with airlines that crash and burn, of bankruptcies, of eye-wateringly expensive equipment. This is a cut-throat industry where pilots and first officers are poached by carriers with deeper pockets than yours, where passengers can instantly trash your reputation with a couple of unhinged tweets and where a virus  — ironically airborne —  can strike you out of the sky faster than the sun did for Icarus.

In 2001, the skies were different. Novick’s airline — Kulula — had blown a Boeing-sized hole in the lumbering protection racket of SA’s skies and turned air travel on its head.

The sight of its noisy — and cheaply acquired — 727s roaring over  Joburg that spring let everyone know that there was a new game in town, one that didn’t involve paying absurd fares to an airline that even with the spigot of free government money cracked wide open, could barely keep itself aloft.

“I was very happy to be out of it, to be honest,” says Novick of his decision to quit Kulula in 2011.

“I enjoyed sitting on flights, not worrying about anything, not caring if it was 10 minutes late or if the food wasn’t good or if the crew were unfriendly. I never had a deep aspiration to get back in.”

SMALL AND NIMBLE

Until now. Even as Covid-19 wreaked destruction on the global airline industry, Novick saw there was a gap for a small, nimble carrier that would adapt to the fluid situation the world now finds itself in.

Enter Lift Airline, SA’s newest carrier, which took to the skies for the first time on December 10.

That was a month or so after stunned South Africans learned that SAA was to get yet another massive bailout from the government, which appears addicted to this updated Oliver Twist with its perennially empty begging bowl.

The new airline is a three-way venture between Novick, former Uber CEO Jonathan Ayache and Global Airways, a local aircraft leasing company.

In a break from tradition with most other domestic airline start-ups in the past 20 years, Lift’s fleet comprises three modern Airbus A321 airliners which are owned by Global.

The previous model involved new carriers leasing — or often buying — elderly and inefficient aircraft that could be had cheap during the boom-and-bust cycles that hammered the industry  after the dotcom wipeout, post-9/11 and the great financial crash of 2008.

Agility is  everything —  in how to handle risk, in the business model, in the financial structure

As the operators all learnt,  old aircraft — such as 1Time’s elderly MD-82s, Nationwide’s long-in-the-tooth 737s (one of which famously parted company with one of its engines during takeoff from Cape Town International) and Kulula’s own 727 trijets —  are, like racehorses, expensive to keep.

It is a lesson that Novick has not forgotten.

“Right now is probably the biggest possible drop in history in demand for aircraft,” he says. “It’s a great opportunity, not only in terms of the cost of aircraft but also the flexibility in terms of paying per use and having this fixed commitment.”

In conversation with Novick about Lift, the word “agile” comes up a lot.

“Agility is now everything —  in how to handle risk, in the business model, in the financial structure.”

He points out how demand for air travel month on month has dropped dramatically in January. Part of it was the seasonal element. People have returned from holiday and gone back to work and the airline has dropped its flights between Joburg and George.

Then there’s the uncertainty that comes with the pandemic.

“Firstly, there are some restrictions on moving around and then fear and uncertainty, all playing into people hunkering down and staying at home. So we’ve scaled down as much as we quickly scaled up to get started.”

It’s a long way from the Kulula days, too.

LEARNING THE ROPES

Novick, 51,  was born and raised in Johannesburg. He attended King David school in Linksfield and studied accountancy at Wits university.

In 1996, he went to the US to study for an MBA at Kellogg business school, part of Chicago’s Northwestern University.

It was an exciting time to be in the US, says Novick. “The US was and probably still is the centre of business innovation, consumerism, technology, companies of massive scale that we just didn’t really know or understand in SA.”

While he was there, two things happened that would have a remarkable impact on his world view and which would lead, in turn, to Kulula.

First he met Herb Kelleher, founder of Southwest Airlines, the carrier that  is regarded as the genesis of the whole low-cost, no-frills airline revolution.

“He was an incredible character and businessman and an interesting human being,” says Novick.

“In terms of inspiration and leadership he was an incredible role model — not only in the industry but as an iconic character.”

Southwest Airlines, so the story goes, began as an idea that Kelleher jotted down on a cocktail napkin in a bar. The scheme was simple: fly people where they needed to go with the minimum of fuss and at the lowest price possible.

To reach that price, a couple of things needed to happen. These included doing away with free in-flight food service, business lounges and lumbering and expensive support structures. By passing on those savings to passengers, ticket prices could be dramatically reduced.

Operating standard fleets with one type of aircraft on point-to-point flights unlocked further savings.

As Kelleher had noted, passengers will choose the lowest ticket prices they can.

Better yet, the model allowed airlines to make money from services they had previously given away for free. Food and drink was available on a pay-as-you-go basis. You could pay to go to the front of the queue at boarding. You would pay more for extra baggage. You would even pay more for select seats.

It was simple and genius at the same time.

The other visitor to Kellogg who helped shape Novick’s world view was then-Kodak boss George Fisher.

“He was saying what a wonderful company Kodak is, so big and so successful. At the end of the session I put up my hand and asked him about digital photography.”

Fisher replied that that was something the company was aware of and that it had some potential but that it wasn’t where Kodak made its money —  it made its money from selling film and that was where its efforts would continue to be focused.

“That was my biggest business school lesson,” says Novick.

TAPPING A GLOBAL TREND

On his return to SA, Novick joined his father, Dave, at Comair.

Novick senior had spent his whole career at the company, which by then was a venerable and  well-established regional passenger and charter airline.

Comair was going through big changes itself, says Novick, transitioning from a regional player to a mainstream operator. It had been awarded the British Airways domestic franchise and the skies were opening up.

Before deregulation came to SA’s skies, routes were split between SAA operating the major routes and other airlines applying for the smaller routes.

“Comair really built its early business flying gold miners to Welkom and the tourists to Skukuza and Phalaborwa,” he says.

Winning  Comair over to the idea of starting a low-cost airline along the Southwest model was not difficult.

My father said 'start a low-cost airline. You’ve got two months to do it’

 “My father was chairman. He said ‘start a low-cost airline. You’ve got two months to do it.’ So we got cracking.”

Novick admits his father likely had opposition from some of his older contemporaries who said ‘why would we compete with ourselves when we’ve already got an airline?’

“It was the age-old dilemma —  do we eat our lunch or does somebody else come and eat it? It was going to happen with or without us.”

Kulula came at the right time. It tapped into an overwhelming global trend — a shift to a consumer-oriented, internet-based distribution model.

“That was of huge interest to me — seeing the potential application to the airline industry,” says Novick.

“It was an exciting time in terms of technology. Our internet may have been slow and cumbersome but it worked.”

It was the age-old dilemma —  do we eat our lunch or does somebody else come and eat it?

 The question, however, was whether people would be prepared to transact online.

 “Shortly after launching Kulula we did a survey amongst the other online retailers and found we were the biggest in the country at the time — there just wasn’t any online retail basically. There was NetFlorist and Bidorbuy,” he says. “Small players.”

 As it turned out, air tickets were the perfect product to sell online because there is no physical product, only a booking confirmation. As soon as people got used to entering card details online, the business went mainstream.

Still, not everyone was happy transacting online and even today there are people who arrive at the airport and pay cash for their tickets. “It surprised us at Lift,” he says. “We’ve got a tiny little office and people bring their money —  that still happens even today. We don’t ask where the cash came from.”

PRICE WARS

The rest of the story is history. Kulula took off and other would-be aviation entrepreneurs took notice. Soon there were other airlines fighting for a slice of the sky. 1Time took off with its roomy, bright red planes with their black-leather seats. Velvet Sky came — and went. So did Skywise. Santaco, the taxi association, said it was going to launch its own airline. Scenting the wind, SAA launched Mango, its own no-frills carrier.

There were price wars. For one brief, heady moment an air ticket from Joburg to Cape Town cost the same as a bus ticket.

“The impact in the industry was a doubling of volumes by virtue of the emergence of a new model,” says Novick.

Paving the way for other players came back to haunt the green machine.

“I think it was an inevitability,” says Novick. “Of course it would have been nicer not to have the competition — no matter what anybody tells you, it’s nicer not to have competition than to have it.”

Novick quit the carrier in 2011 after five years as joint-CEO with Erik Venter.

By then, Dave Novick had been at Comair for 50 years. “He was ageing and had some health issues,” says Novick. “I felt it was time to get out.”

Bidvest had also become an increasingly influential shareholder and the father and son did not see eye to eye with them on all issues. The joint-CEO arrangement was also taking strain.

“We made it work for a while but it’s not a good solution,” he says. “The ideal scenario is to have a head, a CEO who is collaborative and not ego-driven. To have a vague split of authority is confusing. It was like a mom and dad scenario. Mom and dad are joint CEOs but we all know that mom is the real CEO. And the kids know that as well.”

Novick took time off to go travelling with his wife Lindie and four children, visiting the US and China.

A spell heading up Discovery’s Vitality programme followed.

“It was very exciting for me — a big company, a different industry, lots of smart people and an innovative culture. It stretched my own thinking.”

But missing being in an entrepreneurial environment, he moved on to other ventures, including an online prepared-food delivery service called Salud.

“It didn’t work. The product was great but we went the fresh route rather than the frozen route and the market wanted fresh-frozen meals.”

Now he has come full circle except that this time Lift is the competition and Novick has brought his lessons to the upstart.

There are no more glossy, expensive long-running advertising campaigns — marketing is done by social media.

There are no call centres either. Communications to passengers are message-based. When the new level 3 lockdown restrictions were announced just before the new year and the airline could only start flights at 8am, it  was able to respond to its passengers immediately without them having to wait on a call line.

Lift’s mainstay route is Joburg-Cape Town, which still has the best passenger demand in the country.

“That’s where we’re going to put all our effort but we’re open to other routes and opportunities,” he says. “We’re not going to say no to anything if there’s an opportunity.”